Saw this on Business Insider.
https://www.businessinsider.com.au/australian-bargain-hunter…
Surprisingly Ozbargain wasn't mention as contributing factor. Haha
Australian Bargain Hunters Are Hurting The Economy The RBA Warns as The Price Wars Wage on
Lbazinga8888 on 25/06/2019 - 15:00
Comments
Is there any way to buy a Persian carpet other than at a closing down sale?
Saw a couple of great examples of that. One was the “annual closing down sale” and the other was “opening sale, all stock must go”. Sort of sums things up.
Trying to get the most efficiency for my dollar is bad for the economy?
I don't know which universe these jokers are from but they may as well say that a bad economy is bad for the economy because everyone will want their dollar to go further.
It's the paradox of thrift. Saving and investing is good, but if we all pulled in our spending on discretionary items the economy would go into a deep recession.
Boosting the economy by pumping in more money isn't really a solution either. Tax cuts for all and lower interest rates. Great. But if people use that money to get larger home loans as they've now got a bigger deposit, then it's not a good thing at all for the whole economy. That money still needs to be paid back, and now the debt load is even higher and will be a greater burden if government decides to claw back the tax cuts or interest rates go up.
Increase wages! People get less tight on their own pockets and lesser nervous about spending instead of feeling insecure. More security may lead to higher risk tolerance and hence more inefficient spending habits.
Or reduce rent and property prices. The middle class are the money spenders. If the middle class have no disposable income because it's all used to pay rent and Bills, good luck boosting the economy.
Or reduce rent and property prices.
You would have to point that to the wealthy class as they're the ones setting that…
And foreign investment that don't even live here :)
Economists always seem to like increasing wages as a solution. But in the real world you increase wages for everyone and that ultimately gets passed onto product costs which means you earn more but everything now costs more, so I fail to see how anyone is better off?
Other than slightly more gst/payroll tax getting collected?It's not as if our wages are now so high that many jobs that could be done here are now sent overseas so some people aren't getting any wages.
Oh wait…
I don't know. I saw a motivational post on LinkedIn about grad dev asking for AU$120k and ultimately getting the job.
The comments were mainly from US people who seemed to think that was a mediocre pay for IT in equivalent US$, even in more rural US areas.Perhaps we are nearly the next place to outsource IT to 😂
Modern day economics relies on inflation to work. However, Central bankers and governments are yet to find sensible ways of dealing with deflation and/or stagnation in the economy. Governments can’t tax deflation, but it’s great for consumers (who still have jobs) as you can buy more with less but will effectively mean consumers delay their spending in anticipation of future price drops. If QE, QT, ZIRP, negative interest rates and loose monetary policy are all CBers have to offer to boost equity and property markets and stimulate the economy, we’re in for a very very difficult time at some point in the future..
Exactly. Can't understand why people can't think past the point of I want a wage increase, even for the most menial work, without considering the implications. Common sense will tell you that the cost of increased wages is immediately past to the consumer with goods and services increasing in price by the same or greater amount. So at the end of the day, no one is better off, except the government collecting slightly increased GST. Also means the push for automation is increased, such as with self checkouts and kiosks now, which means loss of jobs. Also will drive more businesses to outsource as much work as possible to overseas, including even telephone booking services, book keeping etc. I know some people already utilizing overseas admin services for less than $10 an hour.
You are right, increase in wages can't be the solution if applied to everyone. The wages have to increase higher in relative terms to the cost of goods for people inorder to have higher disposable incomes.
The other lever is reduce taxes.
But not at the cost of reduced essential services. Maybe the fat cat politicians need a pay cut to balance this out.
I am not sure if removing politician pay entirely would make any noticeable difference.
@[Deactivated]: Maybe if you take into account their 17% super or whatever it is, it would be more than you imagine
I agree; I heard a report yesterday that outlined how nett tax rates would still be higher than 20 years ago, even if the current promised tax rate changes are all delivered now.
But some of those tax rate changes are not scheduled for implementation for a couple of more years, and we would still be behind from years ago.Tax bracket creep has increased income tax inputs to create the current 'surplus' that the government talks about.
Employees are funding that.Money paid in taxes goes almost entirely back into the Australian economy by employing people, paying for services, upgrading infrastructure, etc.
Cutting wages gives money back to workers, but a large portion of it goes to people who won't spend more when taxes are cut, and a further large portion of it will immediately go overseas on goods and services.
If you want to stimulate the economy, pay people in Australia to do things - whether that be working in health, education, construction, etc or perhaps studying, or building new businesses and industries.
Unfortunately it doesn't.
About 70% of our income taxes is simply wealth distribution and goes directly into the pockets of others (via Centrelink, Medicare, etc).
30% or so is roads, Defence, etc.
@MementoMori: I consider Medicare to be more of a service than wealth distribution. Medicare pays for people to receive a service; that service is almost entirely provided by Australians - keeping the spending in Australia.
Several comments touched on the facts of our 'economy' but yeah, it's worth remembering to the extent the RBA isn't just spruiking a convenient lie that they are talking about the macroeconomic impact of bargain hunters. For any given individual, it's still worthwhile to pursue bargains - the problem (if it is one) is everyone doing it.
On the other hand, the RBA doesn't seem to think there's a similar problem with the whole outsource everything overseas idea, or use imported slave labour to achieve the same. It's the same dynamic. For a single business to cut any costs it can is good, but when they all do it, everyone has less to spend and we end up with a sad and crippled economy.
I don't expect to hear the RBA complaining about the latter even though it would be hugely more significant.
For a single business to cut any costs it can is good, but when they all do it, everyone has less to spend and we end up with a sad and crippled economy.
That is literally the 2008 subprime mortgage crisis and subsequent, global GFC explained in an nutshell.
One bank saw that another bank's predatory lending and mortgage fraud was making huge short-term gains and decided to do the same thing, assuming the rest of the market's liquidity cushion would even out the risk. The trend caught on, all the banks started doing it and then the entire financial market crashed.
Do as we say, not as we do, peasant.
ROFL at the article.
What do you expect us to do? Happy to be screwed?
Gerry says YES
A while back the rba was urging employers to give out wage rises to help the economy, yet when it came time to increase the pay rate of their own employees they played hard ball.
Lower taxes higher wage growth less red tape
stop all spending that doesnt directly support Australia/Australians/Australian Economy
Nope, maybe, nope. The less red tape is a huge furphy. It depends on what the red tape is doing. Because recycle people weren’t being properly managed tax payers will need to spend hundreds of millions to fix up toxic sites, a bit of proper oversight might have avoided this. The cost of disposal of goods should be built into the cost of selling them. “Red tape reduction” has become a way for society to bear the costs of bad business people, not the businesses themselves. Look at the mess for the cladding, the sub standard apartments, toxic waste dumps. All situations where the business, basically, walks away and we are stuck with the bill. Lower taxes mean lower services, I can’t build a hospital on my own but I don’t want to go broke if I get sick. Successive Governments have sold off our assets and we are getting screwed on essential services sold to businesses to make a profit off. I own shares, worked in a well paid industry, didn’t have kids. I’ve done very nicely out of the economy but there are plenty who haven’t. Simplistic propaganda is not the answer.
Thats fair enough and i agree with you, but 6% stamp duty on property to basically cut and past someones name on the title is a bit of over kill?
$808 a year to register a car in Victoria - which doesnt even include 3rd party insurance so if some moron hits you and doesnt pay your fit with the bill
However the govt still spends about 4.04 billion (Yes Billion with a B) on foreign aid…..
44million every year is spend on Politicians pensions even though they are all well off and would be the cut if they were means tested like a regular pension?
Teachers/Doctors/Nurses etc spend more time doing admin work then treating patients or teaching students because of 'red tape'
Govt has also given money to the car industry in the past to keep them (that worked out well), fighter planes that arent fit to fly, a billion on a road we didnt build…etc
Australians shouldnt be paying more then income 25% tax and 10% gst
Child care, University and health care (including dental) should all be free
We should have a proper road and rail network to stop losing 2.5 billion dollars in productivity due to congestion
Welfare payments should be in the form of a gift card to stop tax payers money being used on drugs, Alcohol, Cigarettes and gambling - as a large chunk of our gdp goes to welfare
We pay A LOT of tax in Australia it just isn't utilized efficiently due to incompetence and/or political correctness
i could go on but you get what i mean…
I love getting taxed on my wage, then pay gst when I buy a car, pay the transfer fee, then pay rego on that car, then get taxed and pay fuel excise on the fuel to power the car. All so I can get to work every day and start the tax cycle all over again.
Same things with a house and pretty much everything else. We are getting taxed, levied and excised into oblivion, meanwhile multinationals get away with paying no tax, and the government pisses what we do get up the wall.
@brendanm: You actually pay GST on the fuel exise, so you get taxed on your tax. And the petrol station pays sales tax on that purchase, for the fuel they purchased at a higher rate because of the sales tax that the supplier had to provide
Let’s see.
Stamp duty on properties could be looked at as a form of GST based on sales transactions so the rate could be 10% rather than 6%, if the Government decided to be bloody minded.
I doubt the car registration and fuel taxes cover the cost of maintaining the road networks, so the tax payer is still subsidising car drivers.
Foreign aid is important, apart from anything else the more you help people in their own country the less likely they are to try to come over here. The main issue is to stop the aid being wasted by corrupt people, but we have that issue here as well.
I agree with you on the Pollies pensions, but best of luck getting that sorted out by the people who most benefit.
Red Tape for Doctors/Nurses/teachers is necessary. That is how mistakes are evaluated and new procedures in place. I’m sure you don’t want mistakes, or incompetence, swept under the carpet.The reason they have spotted some of the mass murderers in some hospitals was checking hospital death records against people on ward at the time.
Governments waste money propping up industries that should die, like the coal industry. The problem is knowing what is the winning horse from the outset.
Tax is dependent on the level of service. Generally the lower the tax the lower the services. If you want free health care, dental, child care it has to be paid for somehow. I agree with you these should be free.
Yes, we should have a proper road and rail network, it needs to be paid for. We need to get people out of cars and improve public transport. Travelling by car is hugely inefficient where traffic is big enough to cause congestion. We need to funnel people to train stations with more frequent services. I’ve just been to Paris and their rail service is great.
Welfare is a vexed issue. The problem is if you give people gift cards they will sell them to buy drugs and alcohol. There is a complex interaction of mental health issues, abusive backgrounds, etc that mean it isn’t so cut and dried. In Victorian times they would build model towns where the lives of the people were managed by the industry. Would you like your employer telling you that you only keep your job if you don’t ever buy alcohol with your wages?
Yes, Governments waste a lot of our money, usually funnelling it to their mates. I don’t like it and fight against it.Don’t use the term “political correctness” it makes you look ignorant.
@try2bhelpful: Ok Stamp duty was around before GST and was meant to replace stamp duty there is also a number of studies that support a land tax that discourages rich ppl hoarding multiple properties it would also allow older people to down size from large properties without being punished by a huge tax -
Your comments on foreign aid basically Australia needs to give money to countries so those people dont come to Australia? wtf kind of argument this that just dont let them come here im all for migration but Australia isnt a charity and handing out to all these refugees and Asylum seekers who are 67 times more likely to participate in aggravated theft and home invasion…. instead of just spending the money on stopping the tap we are allowing it to keep filling by funding corrupt nations…. - however if a PM or anyone say this they are shouted down by PC idiots
We pay too much tax in Australia we pay more tax then countries that have free health care, child care education, university etc and we have far more natural resources and far more land then say Scandinavian nations.
As for your argument about the cards easy fix set the cards to be identifiable to the owner of them not a gift card but a bank card - sure some ppl will still sell good from what they buy with the cards but it makes it one step hard to blow money on drugs/alcohol/smokes - but again PC community lose it if you say that
If you think Political correctness isn't killing westerns countries then perhaps you should look at the definition of ignorant
This will be pretty anti PC but aboriginals and TSI get $2.2 funding for every $1 not aboriginals and TSI get yet they have much poor health/education outcomes but the PC community would say they need more money but the reality is they need less and they need to just be treated like everyone else - but hey im ignorant over $2 billion in closing the gap but the gabs got bigger and PC heroes think throwing money at the 'gap is the solution' but if you say that you are a racist….
Open your eyes the PC society is killing us, sure it isnt the only reason we are f**ked the other issue is no accountability in our PMs that are over paid and under qualified to lead this nation - but when you got the Greens Leader saying he supports legalisation of illegal drugs but opposes tax cuts that would help the economy you gotta blame mostly left wing PC morons vote for them it is hard to not blame them
@Trying2SaveABuck: Man, what the actual f*** are you smoking? Who are these "left wing PC morons" you speak of? Sure, there might be some idiots who take offence to everything and just like to make a victim of themselves, but to blame every single problem on "PC morons", you really have no idea what you're on about.
@p1 ama: Fair enough not everything is these pc (profanity) but you got to admit they are the vocal minority
Ie the vegans blocking traffic
The gender neutral idiots etcIe the vegans blocking traffic
They were a nuisance, they were removed, nothing came of it.
The gender neutral idiots etc
What about them?
Neither of the groups you've listed have "killed society". If vegans and gender neutral people people didn't exist, how would your life be different?
If vegans and gender neutral people people didn't exist, how would your life be different?
Not as much stuff to get angry about?
@Trying2SaveABuck: I think you will find they support lower and middle income tax cuts but not top end tax cuts.
Which if you have a look the average joe on about 50k gets 1k back in tax and the not so average Joe on 200k gets 7k+ on tax cuts.
Its a poor mans argument when you have to tell half the story to make a point.
I wish Australia would follow USA example:
No ISP regulations. As result people pay $50+ for about 1 Mbps. Usually only one ISP in the area. Awesome!!
No medicare tax or PBS. As a result, I have heard of people paying thousands to give birth or buy drugs.
Wonderful paradise to live in USA. Did you know people consider European taxes cheaper than USA taxes when factoring in medical costs? Yet European taxes are very high.
I lived in the US for 10 years, yes internet is great over there (1 gig connection for $65usd/m, real speeds about 750mbps up and down), cost of living was also great but healthcare was expensive, the roads are crap, and you have to live with gun-toting morons not to mention a dimwitted person running the country
a dimwitted person running the country
Hilary didn't win FYI :P :D :P
It was nice in the UK when my phone plan had my unlimited data, minutes & sms for £10 per month - 10 years ago!
Lower taxes higher wage growth less red tape
That's nothing but slogans - how do you achieve lower taxes, what would you cut? How would you promote higher wage growth, especially when you've just cut taxes and will find it harder to support industries which hire people? And what do you mean by red tape? What specific red tape would you cut?
I would start by cutting one level of Government, most likely the state one, should be able to save a few dollars there.
Why the states? I think we'd be better off chopping the local councils.
I would prefer more efficient use of taxes. There's so much inefficiency in so many of the systems we spend them on. Lower taxes means less spent on the things that get us to work - roads, our health etc.
So true. What makes Australia great compared to the US is our high tax and money being spent on government services and healthcare.
The idea that less tax and more money to yourself is stupid because the general population can't be trusted to be responsible with their own money and set aside an emergency fund, which would have been handled by tax money
(profanity) the RBA for saying this. The cost of living in Australia is ridiculous compared to most other western countries. We are well within our rights to find appropriate pricing.
The RBA didn't actually say what's in the headline.
This is the report from the RBA.
It's more like Fuсk businessinsider! for their stupid outrage article.Yeah I didn’t read the article. I took a risk making a call based off this thread.
A lot of people in the thread probably did this :)
(profanity) the RBA for saying this.
See my comment below, the RBA never said this at all…
The more they lower interest rates, the less I feel like spending out of spite.
The more they lower interest rates, the less I feel like spending out of spite.
If everyone acted like you, then rates will fall even more, and more, and more…until the economy collapsed entirely and we're all back to growing our own food.
Yes! But my lust for spiteful actions ultimately harming myself will finally be satisfied. Ahh sweet release.
Our economy is like an AWD system with each pair of wheels pulling in opposite directions.
Put another way, we have a foot in both camps — filtering in the US model while retaining the quasi-socialist NZ/CN model.It will play out like this: all the gouging, delay tactics and hand-wringing of emissions/power prices have emboldened the pro-nuke lobby to offer their White Knight "solution".
Similarly, crippling budget cuts with a view to degradation of services will lead to the solution of full privatisation for things like the CSIRO, Medicare and ABC.
If you think "Mediscare" was a cynical political ploy, I have news for you — some processing is privatised and an HR agency provides casual/part time staff. Who, by all accounts, are clueless.
Slowly-slowly, catchy-monkey.
AWD works, our economy doesn't.
Government sponsored housing Ponzi scheme is ruining out of steam.
Sorry, I didn't express it well.
AWD works
If each axle is pulling in opposite directions? Like a tug-o-war situation?
Agreed on your other points.
Bargain hunting "hurting the economy" is an explicit implication that the economy is reliant on inflated pricing and that the economy isn't there to serve consumers.
Sorry, but no. Bargain hunting improves and corrects an economy by pushing cost of living down and improving consumer buying power.
The RBA doesn't understand the economy very well as the mystical entity of "the economy" isn't really their concern. I don't mean to sound like a conspiracy theorist, but I mean that their concern is maintaining cash flows and stabilising price of the dollar, the 'house', and the ASX. They are playing mathematics, but they don't have a real concept of "value." Which is to say, it doesn't matter to them if say, people can't afford to buy a home - it just matters that the home hasn't skyrocketed or crashed in price. Their concern is that the market stays the same and is not allowed to change. Whether you can or can not get INTO the market is your problem.
Hunting for bargains is an example of the economy acting on actual human value signalling and trying to enrich their lot. And markets respond by improving economies of scale and cutting out non-value. It's a good thing. But if it decreases prices it will always raise the alarm bells for the RBA.
good tip. Never heard of this before. Will try to remember next time I come up against a paywall. Thanks.
Awesome hack mate. thanks.
Opens up everything. Great share!
if shops didn't gouge consumers and treated them with respect, it's less likely that consumers would feel zero brand loyalty as the Australian isolationist retail monopoly that lined hardly normal and dick smith's pockets opens up to other parties.
Overheated property market now cooling, people expecting their house value to double instead goes south. Retailers turn around and blame the consumer for not being the fat sheep to be fleeced anymore, smart move there.
Cars too, economic spending directly linked to house prices.
https://www.smh.com.au/business/the-economy/car-dealers-fire…Most debt run up is from money borrowed offshore. If you buy a $1m house, $0.8m loan borrowed offshore. Interest sent overseas year on year. At some point unless you earn it back (we been selling assets like farm land and companies), there is no money left.
If I take out a 500k mortgage, that's borrowing from overseas?
No it isn't - the money is 'made up' by our money masters. The money is 'created' when you borrow it. Many great docos on how the central banking scam works.
Fractional banking isn't a scam. It is leverage. Just like the idea that you can have 20% deposit and then borrow 80% from the bank to buy a house. The vendor of the house then takes the net (after paying out the mortgage) and then borrow 80% on top to buy the next house. It is the flow of money around the economy. Just like the bank takes your pay then shows you $x in your account but that money could be lent to someone else, you can get it on call. Not all money is backed by notes in a vault.
It is a scam because people don't get it.
Correct, when banks create money they are essentially adding digits on a computer screen and these numbers get represented on the balance sheet as a liability. People working at the banks do not even know this!
There are capital adequacy ratios to ensure banks don’t over leverage but I’d hardly call 10.5% backing adequate (maybe I’m just more conservative).
Clearly, market forces, household debt and the macroeconomy are deflating disposable income, which is the honey pot of the retail sector. God forbid these leeches ever have to earn our business for once in their lives.
The fact that it's OUR FAULT that they have to compete on price is hilarious.
Here's an idea, compete on positioning and value proposition rather than spending the week in the boardroom reminiscing about the good old days of Australian duopolies and oligarchies.
The simple and honest truth is the RBA and our politicians do not understand what is happening in the REAL economy.
They're never happy.
I'm an economist and the article written by Business Insider is a complete sham. Here's the RBA report for those interested: https://www.rba.gov.au/publications/bulletin/2019/jun/compet…
Basically, the report states the obvious, which is that increased competition has led to lower prices and thinner profit margins. This is the sort of thing you'd learn in an introductory microeconomics course. The report actually never links the performance of the retail sector to the broader economy (so the headline is a huge stretch from what the article actually says) and is an example of dishonest journalism.
If anything, the RBA report is a very fair analysis of the situation which details some of the approaches Australian retailers are taking to combat the lower prices including adjusting product mixes, improved inventory management (this is super important), using everyday low price strategies and vertically integrating supply chains to increase efficiency. All of these points are great for consumers.
I don't know if people are more frugal now than before (that could be an interesting research topic for fellow economists!) but with greater access to information, people are less likely to make brash decisions (this has been investigated in information economics to death). Before the internet, I was willing to walk into a store and have a chat to the sales guy and buy a computer (or whatever) for $2000. Now, I'd check the price beforehand, look at 10 different stores and walk in much more informed.
Anyway, all this is straying from the main point. I'm not a macroeconomist (and don't purport to know much about the 'broader economy'), but I would say that the link between prices people pay for day-to-day goods and the performance of the overall economy is generally unclear. People paying less per item means that generally people will have more residual cash which they'll use to buy more and more. The RBA article doesn't touch on any of this (rightly so, because it's a complex topic), so the Business Insider article has completely made all this up.
hi economist, one of my mates a a big hedge fund manager overseas. he's telling me there is a very high possibility of a global financial crisis later this year. Any thoughts?
I'm a competition economist, not a macroeconomist, so this question is sort of like asking a paediatrician to perform brain surgery.
Either way, people have been predicting crashes for ages and one of the reasons why is that if you predict a crash and you're right, you're a hero, if you're wrong, nobody really cares so you're best off always predicting a crash. That said, there are indicators which signify that a crash is coming. Interest rates are at record lows and they can only go up. When they do, I think we'll have major issues.
For the capitalistic ideology I thought that it was held that market efficiency was a priority and this needed to be achieved through competition and letting the laws of supply and demand work unhindered for which participants need perfect information e.g. sites like Ozbargain to make rational decisions and maximise utility. Now suddenly too much information is inefficient because it interferes with corporate profits. I guess the ‘free market’ is gone as long as it serves to justify corporate profits
For the capitalistic ideology
You need to separate out the economics from political theory. The study of economics makes no assumptions about what political theories you ascribe to. The only assumption you need for most of economics is that people want more as opposed to less. The rest is simply what mathematically follows on from this assumption under various restrictions you impose. Economics is a science, it's not politics.
I thought that it was held that market efficiency was a priority and this needed to be achieved through competition and letting the laws of supply and demand work unhindered
Define what you mean by "market efficiency", if you're using the generally accepted definition, which is the Pareto optimal allocation of resources, then what you say is true only under very strict assumptions. In laymans terms, you need a competitive market (which is very rarely the case, most interesting markets are oligopolistic in nature), and you also need perfect informational symmetry (i.e. people are informed, which is not always the case).
This is the case for regulation. I used to work at the ACCC. There are a whole multitude of markets which you simply can't just ignore and deregulate because it will not lead to the Pareto optimal outcome.
There are some markets which violate competition - for example, electricity markets, supermarkets/groceries, bulk shipping, trucking, petrol, public transport, phone services…etc. Either there are significant barriers to entry or the incumbents have such significant advantage that competition is not feasible. Sometimes competition cannot be achieved (e.g. how do you have competitive train lines?)
Other markets violate perfect informational symmetry. For example, why do we have consumer protection laws which allow buyers to get refunds or replacements from sellers. In a "competitive market", we should say tough luck if you buy a dud. Your fault for buying it. Buyer beware. This is not a reasonable outcome because generally sellers know much more about their product than buyers. There is an informational asymmetry here. Of course, the list goes on and on in terms of markets that need to be regulated.
Now suddenly too much information is inefficient because it interferes with corporate profits. I guess the ‘free market’ is gone as long as it serves to justify corporate profits
Who said that too much information is inefficient?
Economics is not a science in the same was as physics. I know it has aspirations to be but let’s be honest it’s not. Behind it are a set of assumptions such as human rationality, the role of property and the state which very political and therefore ideological in nature.
Sure we can say what mathematically follow on but is that a reflection of reality or a self supporting model that makes sense within its own framework only which is why you mention strict assumptions. Very big difference.
I see economics being scientific in the same way as Marxism claimed to be scientific.
Too much information is inefficient in the sense that firms ultimate objective is to maximise profitability which is why in my opinion they tend toward monopolies, duopolies and other strategies to blunt competition. As someone mentioned in the pre intervenet day we’d be paying a huge markup for imported food because we didn’t know the pricing overseas now everything is transparent. Campaniles which needed those fat margins on crappy overseas goods to support their profits are getting screwed.
Economics is not a science in the same was as physics. I know it has aspirations to be but let’s be honest it’s not. Behind it are a set of assumptions such as human rationality, the role of property and the state which very political and therefore ideological in nature.
You have a fundamental misunderstanding of what economics is - you're describing politics, not economics. There is no ideology in economics, there are disagreements, but the disagreements are not ideological in nature. Whether a person is politically left leaning or right leaning has no bearing on what economic theory tells you.
You might not necessarily agree with certain policies, but it doesn't change the economics of the situation. For example, I'm a proponent of making universities free. That's based on my view of what society should provide (i.e. it's a political belief). The economic analysis will show whether it will benefit society or not. My view can't affect what the reality is.
Sure we can say what mathematically follow on but is that a reflection of reality or a self supporting model that makes sense within its own framework only which is why you mention strict assumptions. Very big difference.
Yes, that's how you model anything. You begin with a set of assumptions based on what you can observe and you build a model which explains certain properties conditional on those assumptions. It's not something that is unique to economics.
Too much information is inefficient in the sense that firms ultimate objective is to maximise profitability which is why in my opinion they tend toward monopolies, duopolies and other strategies to blunt competition.
That's a misuse of the word inefficient. Of course firms will want to be monopolies, they make higher profits. That's obviously true.
As someone mentioned in the pre intervenet day we’d be paying a huge markup for imported food because we didn’t know the pricing overseas now everything is transparent. Campaniles which needed those fat margins on crappy overseas goods to support their profits are getting screwed.
That's also true and I agree. Economic theory predicts exactly the phenomena you're describing, so I'm not sure what your issues are?
@p1 ama: I can see where you’re coming from in wanting economics to be above ideology and scientific in nature however I disagree completely. Perhaps the mathematics allows it’s a certain respectability.
As for the modelling based on the real world to simplify and represent reality let’s take the instance of GDP which supposedly measures the total value of final goods and services produced within a given country's borders. Why does it not include housework? It certainly exists because people do it everyday. Why is left out? I’m sure there are some technical reasons floating around but also some ideological reasons as well about what we value as a society.
I actually have a legal background not simply political science. I could carry on a conversation about the technical aspects tax law for instance which prime facie doesn’t appear to be very ideological. However the rules and regulations to reveal preferences in treatment which are ideological in nature. Jurisprudentially speaking, law being a disinterested set of rules in bunk.
So why am I bring to up? It’s because the assumptions behind economics are ideological choices. I do note the different counties clearly have different ways of managing their societies. If there were objective scientific laws which should be obeyed due to their mathematic inevitability then why does countries as diverse as Norway, Japan and Russia choose run their societies differently? The laws of physics and chemistry are sufficiently universal on earth to ensure that a car made in Japan will operate similarly in Russia and Norway but clearly their societies are not.
I’m not trashing economics but I am very skeptical of some of its claims such as scientific objectivity and be able to aggregate human behaviour into a single equation. It reminds me of Freudian psychoanalysis. Freud based his theory on work he did with upper class Viennese and attempted to generalise as representative of the whole of humanity when humanity is actually quite diverse.
I can see where you’re coming from in wanting economics to be above ideology and scientific in nature however I disagree completely. Perhaps the mathematics allows it’s a certain respectability.
Again, I think this comes from a misconception of what economics is - I'll explain in regards to your next point.
As for the modelling based on the real world to simplify and represent reality let’s take the instance of GDP which supposedly measures the total value of final goods and services produced within a given country's borders. Why does it not include housework? It certainly exists because people do it everyday. Why is left out? I’m sure there are some technical reasons floating around but also some ideological reasons as well about what we value as a society.
It's because housework isn't traded so it doesn't form a part of GDP. If someone is getting paid to do housework, then that's considered a service and it would be included in the measurement of GDP. Either way, there are many different ways to measure different things. We have to agree on some accepted "units" (if you will) to be able to perform any sort of analysis.
I actually have a legal background not simply political science.
I think perhaps the best way to explain it would be that economic models are very much like laws - they are meant to be apolitical in nature. Also like with laws, the results of economic models need to be interpreted and they can be used for political purposes. However, the economics itself is not political.
For example, I previously worked on a project with several coauthors on the effect of education on women. We found that women benefit less (in terms of their wage increase) compared to men when attaining higher education. This is what the economics tells us.
Now one could look at that and say that this is a completely fair situation, someone else could say we need laws mandating equal pay, and someone else can say that we need to fund special programs for women in universities! These are all political points that, of course, are related to the original economic study, but are not directly the result of the study itself.
In other words, economics does not (or at the very least, tries not to) make value judgements. The economic evidence can be used to support or attack certain political positions, but the evidence itself is not political in nature.
If there were objective scientific laws which should be obeyed due to their mathematic inevitability then why does countries as diverse as Norway, Japan and Russia choose run their societies differently?
Because they have different value judgements and that informs their policy. They study of economics, in and of itself, does not tell us what we should do.
For example, a study shows that giving kids icypoles at school makes them happier and they learn more. Suppose that this has been well-studied and shows to hold with enough generality. Should we give out free icypoles? Some might say yes, some might say no - it's a value judgement.
The laws of physics and chemistry are sufficiently universal on earth to ensure that a car made in Japan will operate similarly in Russia and Norway but clearly their societies are not.
Not really, "how a car works" is not a value judgement. I'll give an example that I think is more relevant.
Of course we all know that physics tells us a faster moving car is more likely to be involved in serious accidents (higher momentum, higher impulse, higher forces on collision…etc.). However, some societies have very lax regulations on speed and some societies have very tough regulation on speeds. The politics doesn't change the physics.
Another example is that alcohol has been shown to have very negative effects on health. Some societies have very strict regulations on alcohol for this reason, some basically don't care. Again, the politics doesn't change the science.
Economic example is that increased education leads to higher wages. Some societies provide very high standards of education, some don't care. Again, the politics does not change the economics.
I’m not trashing economics but I am very skeptical of some of its claims such as scientific objectivity and be able to aggregate human behaviour into a single equation.
You have to go back to what economics is about. As much as we like to think that economics is a practical field concerned with solving all of the world's problems, it's not like that at all. Economics is incredibly abstract at times, especially in some of the theoretical micro fields that I'm involved in.
It doesn't claim to be able to aggregate human behaviour, but rather, it acknowledges that the world is so incredibly complex that the only way we can understand it is to simplify it down to a simpler, more idealised world that we can study. Then we try to add features that make the model look a little bit more like the real world. As we understand more, we realise that some assumptions we initially made were wrong, and that what we discover only holds true under some very strange assumptions.
This is not unique to economics - in physics, we all believed in Newtonian dynamics until Einstein's special relativity when we learned that Newtonian behaviour only applies at relatively low speeds. Economics evolves in a similar way, with contribution from theoretical aspects and empirical aspects that help us to have a better understanding of the world.
@p1 ama: Re the housework example it still exists irrespective of whether someone pay for it or notable it can be measured because people pay others to do it. I’m saying it was an ideological consideration not to include it for gdp purpose because the very act categorisations. If you look at the process of how humans order their world and give priority to certain things over others then these acts are ideological in nature because they show what we value or others things. Look at how we are discussing this point. For you this is a technical issue but I’m saying let’s look at the reasons behind it and how economists can to that decision.
Just to make myself clear on the law it’s not objective, it reflect the political interests of those who control the executive, parliament and judiciary at a political and cultural level. Economics is suppose to be a means to determine and explain various phernomena but law is a framework to shape society. Just look at the white Australia and Jim Crow laws in the US.
Don’t forget that Newtonian physical applies at low speeds universally all over the world. The discussion about the car was linked to the universal applicability of science as proof of its validity and therefore that economics can’t claim to be a science of it differs from society to society. East Asian economies developed very differently from the 1950s because of policy choices and those were based on a differently economic perspective. Physics works the same way in Japan as it does in Australia so why do economic policies differ?
Re the housework example it still exists irrespective of whether someone pay for it or notable it can be measured because people pay others to do it. I’m saying it was an ideological consideration not to include it for gdp purpose because the very act categorisations. If you look at the process of how humans order their world and give priority to certain things over others then these acts are ideological in nature because they show what we value or others things.
I think this point really shows that you don't know enough about economics to discuss this. I apologise if this sounds like I'm trying to be condescending or nasty, I'm really not - if we had a discussion about law, you'd say the same thing about me given how much I know. The issue is that economics is a highly complex and specialised field. Most economics jobs require at least some graduate studies - people spend years at university to have the required knowledge to discuss economics.
Economics isn't people just sitting around bantering about which political policies they think would be good for the country. Economists might discuss policy, but this is no different from a doctor, teacher, engineer…etc. discussing policy.
The point about housework is irrelevant - you say "irrespective of whether someone pays for it" - that fundamentally changes what you are measuring. GDP is by definition goods and services, which are defined as things that people pay for. They do not include gifts, they do not include you doing your own housework, they do not include volunteer work, they do not include you taking a shower because you have to…etc. This is a philosophical discussion if anything. You're basically saying why don't we consider a truck a car?
The discussion about the car was linked to the universal applicability of science as proof of its validity and therefore that economics can’t claim to be a science of it differs from society to society.
Economics is not policy, I don't know why you keep pointing to different places having different policies as evidence of economics not being universal or "not a science".
I gave you an example before - alcohol is proven to be bad for your body. Obviously we all accept that as settled science. So why do different places have different policies related to alcohol? Does this change the science of alcohol? Obviously not. Same thing in economics. Policies are a reflection of people's values, of people's interpretation of the science, of the whims of those in power on any particular day, what wins elections, what is popular…etc.
East Asian economies developed very differently from the 1950s because of policy choices and those were based on a differently economic perspective. Physics works the same way in Japan as it does in Australia so why do economic policies differ?
Yes, but policies in regards to physics are not the same. Physics tells you that a collapsing house can kill people. Why do some places have strict building codes and other places don't care?
I'm not sure if you're being dense on purpose or have a fundamental misunderstanding of what economics is. You keep bring up policy (e.g. policies in Japan, policies in Australia…etc.). I've worked as an economist for many years in the private sector, in academia, in government. I've never once discussed any government policies as part of my professional work.
I'm a competition economist who studies markets. There are certain indicators of anti-competitive behaviour, such as cutting prices below profitable levels to drive out competition. These indicators are valid regardless of whether the government is left or right leaning, valid regardless of whether we are in Australia or Japan, valid regardless of whether the public believes we should impose regulation on anti-competitive behaviour, valid regardless of whether we are in the richest country in the world or the poorest. It also applies to two small cafe businesses in country Victoria or the biggest producers of oil in the world.
@p1 ama: No I don’t take that as nasty at all. However economics doesn’t exist in a vacuum. I am arguing from the perspectives of philosophy, anthropology, law, politics, history, psychology and science. You can’t make those things go away and claim that economics is the be all and end all of human knowledge because it has some internally consistent mathematical equations that are simplified to the point where they don’t reflect reality.
I’m essentially a skeptical of claims that a single academic discipline can reveal the truth about reality. At a meta level it’s claims to be objective and scientific and not beholden to any kind of ideology are questionable because the way we conceive of the world is driven by distinctions, classifications and ultimately value. I simply don’t accept that it’s sufficient to open an economics text book look at a formula and claim this is scientific but that we need to look behind that to see how it is conceived in the first place which is why I brought up the issue of law and how it ostensibly looks objective but in reality reflect political and ideological interests. Unless you can unpack economics and see behind it you will always trapped within its particular way of viewing the world. Every ideology and religion is the same, it must make sense internally but once you step outside then questions should be raised.
If Government is happy to give our money to the lowest bidder, why should I pay local prices for something I can buy online for much cheaper? Half the stuff we buy isn't even available here anyway.
"Australian Bargain Hunters Are Hurting The Economy": the reason we common people have to hunt to bargains is that housing, rates, repairmen, tradesmens and utilities are all so expensive, leaving us ith very little disposible income. These expenses have been increasing at a much faster rate than wages and govenment benefits like pensions have.
It order to fix this country, we need to lower the "real" cost of live (not the fake figures the government puts out). Lower land values, council rates, water bills, electricity, and construction worker wagers.
It's not the bargain hunters that are ruining the economy; it the top end of town, the capitalists and the pro-capitalist democratic govenment system that is to blame.
Or maybe nobody is ruining the economy.
Maybe businesses who aren't adapting, get left behind.
Bunnings is a dinosaur, it wouldn't let me order everything online, so I went to a variety of ebay sellers instead.But sosig.
I would like to way in on this as a non-expert former rampant consumer. I love shopping, if I could, I would spend it on clothes and jewelry and handbags and other stuff I'm sure the majority of Ozbargain would find frivolous. And before I had kids and a mortgage I did to a point (after I read The Barefoot Investor I found that happy medium of spending and saving). So here are my reasons that may or may not reflect a wider problem:
When the GFC happened and the American dollar tanked and we could all buy stuff from overseas, we were all spoiled rotten. It was glorious, good quality stuff at good prices. Not bargain basement prices, but reasonable ones.
When the dollar went back up, access to the good quality stuff was more or less lost, leaving what's left in the department stores. Poorly designed, mass produced junk that in no way reflects what I want or need, let alone be willing to pay the prices they want for.
Fashion in Australia is shite. The European stores that arrived when the dollar dropped don't offer the same things that they offer in Europe, the quality is poorer, the designs are far uglier - we're just treated like a distant cousin that doesn't matter.
David Jones and Myer have become completely disconnected with what women want. They keep having these launches with TV personalities that most women who want to buy clothes have nothing in common with. And the clothes are just rubbish, there's too much of them, the prices are all over the shop.
There's a wider problem in fashion right now in that it's uglier than usual, nothing cohesive is happening. It's all over the top slutty or Kardashian style sports luxe and just random other shite. No quality anywhere, or when it is, stupidly expensive or never available.
Bricks and mortar need to compete on experience now. You can be comfortable in your own home, go to a beautifully designed website, with no noise around you and just buy what you want. Go to a department store and it's noisy, overloaded with stock, never in the right size, and with salespeople who are nonexistent or rude. They're incredibly overstimulating environments when we're all already overstimulated by our lives.
The environment. I've really cut back on buying clothes because of everything I've read about microplastics being structurally analgous to oestrogens (amongst other things). I think people are beginning to get concerned about the impact of mass consumption. I've been getting into luxury consignment sites like therealreal.com because you get the high quality stuff at the reasonable prices.
TLDR; too much high volume poor quality stuff in overstimulating environments with crappy customer service, feeling nervous about mass consumption.
I completely agree with what you say. I noticed Big w and target ads are more targeted to the everyday woman.
Good comments.
If the RBA thinks that is how you get economic growth we're all ducked. Increasing consumption spending to get the same good/service is the definition of inflation, not real growth.
I think it's the internet and globalisation meaning items have become cheaper nowdays. 10 years ago if i wanted and elctronic item I'd go to harvey norman (that's where i bought my first usb fm player), or if i want something i'll buy new. Because of gumtree etc, i'll now buy furniture etc 2nd hand for a lot cheaper- and no GST. People are realising more about the impact of investment and thus are investing the money rather than spending it. Also due to housing. Anyway my 2 cents, or 2 dollars. Also the shopping bags have been a big thing now. Not only I buy less items (like junk food), but have you noticed having to carry 2-3coles bags around with you means less likely that i'll go to clothing shops, electronic shops etc. I just want to get in there get coles bare essentials and leave.
You can even get a box trailer and furnish your house on the cheap if you have the means and a couple of mates on council pick up nights
I always wondered why those closing down sales last 15 years.